Indian traders who buy rough diamonds from Russian mining major ALROSA have something to cheer about.
Russian banks have started granting loans to ALROSA's foreign clients for the purchase of rough diamonds. This will help the Indian diamond trade that is starved of bank finance post the alleged Nirav Modi scam.
The miner has also granted flexibility to authorised Indian bulk purchasers (sightholders) to buy as low as 55% of the contracted volume so that they do not pile up inventory.
“This will definitely help those who buy rough diamonds from Antwerp. ABN Amro Bank has already reduced its financing for rough diamond purchases and cut down credit repayment period. So, if the Russian banks come forward with business-friendly lending norms, then it is good for the Indian diamond trade,” Gem & Jewellery Export Promotion Council vice-chairman Colin Shah said.
Indian banks operating in Antwerp, the hub of rough diamond trading, have either stopped diamond financing in the Belgian city or have cut down their exposure. In India, too, banks have tightened financing to the gem and jewellery sector.
According to a CARE Ratings report, bank lending to the gems and jewellery industry had declined after the alleged Nirav Modi scam came to the fore. In FY18, incremental credit growth to this industry declined by Rs 1,100 crore, and further by Rs 700 crore the following fiscal year and Rs 6,400 crore in the first six months of fiscal 2020. As of September 30, 2019, outstanding credit to the gems and jewellery industry was Rs 65,600 crore